Despite working in child care for 25 years, Crystal Romero has never seen a shift like the one taking place in New Mexico. “Twenty years ago, I had to furnish classrooms by shopping at thrift stores and yard sales, sanding things myself and repainting them,” she said.
Today, Romero and her husband own and manage Early Learning Academy, which consists of four child care centers in the Albuquerque region; they are under contract to add two more locations in 2026. With approximately 165 employees and close to 700 children enrolled, Romero says they are the highest-paying child care program in the state, and all employees are eligible for full benefits, including health, vision, dental, and retirement. In October, Romero announced, to cheers and shrieks, that every staff member would get a $5 an hour raise.
All this is possible because of New Mexico’s investment in child care, first through American Rescue Plan dollars, then through higher child care subsidies and now with the state’s universal child care program. (The program isn’t perfect, as subsidies aren’t reaching all the families that qualify and the state may not have enough providers to meet demand, but it’s a laudable effort.)
The state’s subsidy pays for full-time child care, even if children only show up for three or four days each week. By studying her average daily attendance records, Romero is able to enroll more students while keeping her staffing levels the same, and without going over the state-mandated teacher-to-child ratios. She keeps floaters on hand to allow her staff to take breaks, so in the rare event of more students showing up, she can still provide appropriate cover.
As part of its community program, ELA hosts an annual event where every child gets a brand new pair of shoes. “Nikes and Air Jordans,” she explained. “We gave away 500 at this location,” she says, of the original Early Learning Academy in west Albuquerque. This year, they sponsored a Make-A-Wish request for a child in their community with a brain tumor and paid $8,500 to send the family to Disney World. Her staff lounges have free snacks and leather recliners, and photos along the wall where she and her husband are pictured at local university basketball games and community events on behalf of their organization.
Child care has long been an industry known for slim margins. But an influx of government funding can change the business model of any sector — and New Mexico isn’t the only state changing the economics of owning and operating a child care center.
Vermont has invested in child care through Act 76, which has increased the number of families qualifying for subsidies and raised the subsidy rate for providers. Massachusetts has set aside $475 million per year for grants to child care providers. Connecticut created the state’s Early Childhood Education Endowment to expand access to child care, funded by up to $300 million annually from the state budget’s surplus with the option to add funds each year.
“As more public money becomes available in child care, that is going to be what attracts different players,” said Elliot Haspel, a senior fellow at Capita. (Haspel is also a fellow at the Better Life Lab at New America, where I work.) “It does pose a policy challenge — how does [providing child care] square with profit-seeking?”
When child care attracts business interest
Increased state funding has done more than raise salaries at local child care centers. It’s also attracted an influx of interest from businesses. As child care providers grow their profit margins, they are now able to increase their spending and become more lucrative customers. And as child care centers become more profitable and have opportunities to expand, they also become more attractive to investors.
Specifically, child care centers have attracted increased interest from private equity. Private equity groups pool financial resources to invest in a business with the intention of maximizing profit, often in the short term. They have long had a role in child care, but became a more prominent force in 2022, when the American Rescue Plan directed significant government funds to keep child care centers afloat. Today, investor-backed chains control between 10 and 12 percent of the licensed child care market, and typically target higher-income populations so they can charge higher fees.
Profit-seeking isn’t inherently at odds with child care, and can be one of the drivers in adding more spaces for children or jobs for educators. In Romero’s case, it has motivated her to expand her business and pay staff competitive wages.
But watchdog groups like the Open Markets Institute have been critical of rapid growth spearheaded by certain investor-backed chains, with their heavy emphasis on maximizing enrollment and minimizing operational costs. Both factors can come at the cost of quality care.
In some instances, private equity groups have purchased an ownership stake in child care centers and then proceeded to dismantle them to promote profitability. The groups sell the land and then require the center to lease it back, while pushing for maximum enrollment and cutting staff hours and student spots, leading to high turnover.
As their share of the market has grown, the investment-backed chains have also taken on a larger role in influencing policy. A 2022 New York Times article found that even though a consortium of investor-backed chains publicly supported the child care provisions in Build Back Better, during meetings with senators and staff, the group “reacted skeptically” to a plan to subsidize tuition for middle- and upper-income families, and raised concerns in its financial disclosures that the legislation would lead to limited profits.
Another group whose interest in child care has grown alongside the state and federal funding is the educational technology sector. EdTech businesses, some of which have the support of venture capital, have proliferated in the last five years, according to Elizabeth Leiwant, VP of public policy and research at Neighborhood Villages, an early education systems change organization based in Massachusetts.
“As providers have more money to spend, they are looking for ways to do things more effectively and efficiently,” Leiwant said.
Some EdTech offerings, like bookkeeping software, can be extremely beneficial to providers, Leiwant says, many of whom got into the work because of their background in early childhood education and may be less prepared or thrilled to manage the business aspects. But Leiwant has also been contacted by venture capital funders looking for feedback on technology that provides educational curriculum for classrooms, or targeted advertising to connect parents to available child care spots. Leiwant notes that there were far fewer such EdTech products — and certainly less venture capital interest — before substantial government funds created a new market. “It led EdTech firms to pay attention to this space in a new way,” she says.
If child care is profitable, can it still be quality?
Across the country, most child care providers make slim profits. Workers make low wages; the average pay is $15 an hour, and most states still put only a small amount of funding into their child care systems. What Romero is doing — expanding, making money, paying her staff well, and providing generous benefits — is a relatively new phenomenon, and not everyone is thrilled about it.
Romero gets “lots of flack from people who say you are using state money to get rich.” But she believes these critiques uphold a double standard. Child care is one of many industries, including health care and education, that receive state or federal funding. Plus, child care work is disproportionately performed by women of color and at wages so low that workers often experience food insecurity and qualify for public benefits. It is often underrepresented in media coverage and in popular culture, TV, and movies. It wasn’t until the Covid-19 pandemic that child care began showing up in news stories as a necessary part of a functioning economy. “I don’t see any other industry that receives state money that feels like they can’t do well,” Romero says.
But as child care gets more attention and becomes more profitable, advocates hope to create guardrails to prevent profit-seeking at the expense of quality and stability. One solution comes from Massachusetts. When Massachusetts made its annual $475 million in child care grants permanent, Leiwant helped create restrictions on larger for-profit firms. These include caps on the amount of grant funding that large for-profit programs can receive (1 percent of total grant funds), requirements to spend a certain percentage on staff salaries and benefits to ensure decent wages, and a willingness to enroll children who receive the state subsidy at every program site.
Massachusetts’ rules do not distinguish between groups that are investor-backed, like the largest child care chains, and private for-profit institutions with multiple locations, like Romero’s (in New Mexico). The only distinction is the size: the guardrails are in place for child care providers that have 10 or more locations in the state. Leiwant said that one of the largest child care and aftercare providers in the state, the YMCA, is a nonprofit organization.
The goal is that providers can make a living, Leiwant said. “But first you should be paying attention to the quality of the program you are providing and having quality education. If you make money on top of that, it’s great – but that is the last rung, not the first rung.”
Ultimately, Romero is proud of the work she has done and the expansion of Early Learning Academy. She believes the quality of the product is what drives their success. For her, compensating and taking care of her staff is the top priority, and the substantial state funding allows her to do that.
“Staff come first before our families, because if they are happy and treated right and feel safe and secure, that is going to be received with our children and families when they enroll,” she said. If not, it leads to burnout. “If the staff are not happy, the families will reap the consequences, and I can’t have it.”
This work was supported by a grant from the Bainum Family Foundation. Vox Media had full discretion over the content of this reporting.
